SK Geo reconsiders extent of $1.3 bn plastic recycling plant project

South Korea’s SK Geo Centric Co. is reconsidering how much it will invest in a planned $1.3 billion waste plastic recycling complex project in the country due to the surging costs and tough business environment and is set to more than halve the spending on the plan as its parent company re-evaluates all new investments.

The chemical subsidiary of SK Innovation Co. in November last year broke ground on the Ulsan Advanced Recycling Cluster (ARC) to construct pyrolysis, high purity polypropylene (PP) extraction and polyethylene terephthalate (PET) depolymerization facilities together at the parent’s refining and petrochemical complex in the coastal city 400 kilometers (250 miles) southeast of Seoul.

SK Geo Centric, formerly SK Global Chemical, is mulling only building a pyrolysis plant, which recycles waste plastic, while deciding on the construction of the PP extraction factory and PET depolymerization facility after a feasibility study later, according to industry sources on Wednesday. The company is in talks with partners for the project such as Canada’s Loop Industries Inc., the sources said.

“We are thoroughly reviewing whether the existing business plan is feasible as the external business environment has deteriorated,” SK Geo Centric executives told staff on April 30, according to the sources.

TO HALVE INVESTMENT

SK Geo Centric had planned to invest 1.8 trillion won ($1.3) in the recycling complex with a target of commercial operations from 2026 to recycle some 320,000 tons of waste plastics a year.

The spending is expected to shrink to less than half of the original plan if SK Geo Centric only builds the pyrolysis plant, while the recycling capacity is predicted to be far lower than the initial goal, industry sources said. The company has only completed the groundwork for the complex and is set to resume construction once the review is concluded.

The subsidiary of SK Innovation, the intermediate holding company of South Korea’s No. 2 conglomerate SK Group, is still poised to carry out all the initial investment at an optimal time considering the company's liquidity and market conditions, saying the reconsideration is just a slowdown of the project.

“The plastic recycling market is set to inevitably grow as the European Union requires the use of at least 30% recycled materials in plastic manufacturing by 2030,” said an SK Geo Centric official.

“Demand is such that overseas beauty, food and fashion brands have already placed orders to buy 30% of annually recycled plastic from the Ulsan ARC.”

Write to Hyung-Kyu Kim at khk@hankyung.com
 
Jongwoo Cheon edited this article.